Older people should of course expect a decent standard of living in retirement. But should they really expect a standard of living which outpaces that of the average worker, especially when the cost of proving it is likely to mean further cuts elsewhere in the welfare budget down the line?
Since his interview yesterday on the Sunday Politics in which he said that pensions would be included in Labour’s proposed welfare cap, Ed Balls has been accused by the Conservatives of planning to cut the state pension.
Balls told Andrew Neil that:
“George Osborne is going to announce his [welfare] cap in two week’s time. I don’t know whether he will exclude pensioner spending or include it. At the moment our plan is to include it.”
Coalition business minister Matthew Hancock was the first government minister out of the blocks, tweeting:
“Amazing: Balls admits that when Labour say they will cap benefits what they mean is they will cap pensions of people who have worked hard.”
However despite the sound and fury emanating from the government, it is time both parties looked again at pensioner entitlements.
It’s understandable of course that politicians have been reticent to do so up to now when over a quarter of voters will be aged over 65 at the next election.
While the debate over spending shouldn’t be framed in terms of a race to the bottom between the young and the old, it’s got to the point where the social contract is so skewed in favour of older people that it’s their entitlements which should be looked at the next time the axe swings.
Today it takes a first time buyer saving half their annual income more than 10 years to put together a deposit for their first home, and in London that figure rises to 24 years. Young people are also much more likely than adults to be unemployed. In the last quarter of 2012, one in four young workers with five good GCSEs and 40 per cent of those with no qualifications were unemployed. Those who decide to go to university can expect to be saddled with debts that, in some instances, they may not pay off until they are in their 50s.
For those just entering the workplace, the minimum wage has already fallen behind inflation and some in the coalition have even called for it to be abolished altogether.
While younger people continue to struggle, older people who own property have seen their wealth increase dramatically in the past 20 years as house prices have exploded. Even those on the ordinary state pension have seen their income increase faster than wages due to the so-called ‘triple lock’ introduced by the coalition, which ensures that the state pension rises in line with whichever is highest out of prices, earnings or a base rate of 2.5 per cent.
As well as asking whether this is fair, it’s also worth considering if it is sustainable. Almost half (47 per cent) of UK benefit spending currently goes on state pensions – more than the £48.2bn the UK spends on servicing its debt. This is likely to increase as the population turns increasingly grey, with half of those born after 2007 expected to live to over 100. Between 2010 and 2030 the number of people aged over 65 will increase by 51 per cent.
The rate at which the population is ageing means that while there are now four people of working age supporting each pensioner, by 2035 it will be just two and a half, and by 2050 only two.
Ed Balls said yesterday that Labour would honour its commitment to the ‘triple lock’, meaning that the cost of providing the state pension will rise further in coming years because of this pledge and due to Britain’s population bulge.
If the economy enters a long period of stagnation similar to the one that gripped Japan 20 years, things could be even worse. As Andrew Oxlade writes for This is Money:
“…GDP would most probably stagnate or even shrink, year after year. Most welfare payments – those linked to inflation – would grow more slowly or could even be frozen. But the Government’s ‘triple lock’ promise would ensure state pension costs keep rising at 2.5 per cent – a compounding pledge that could become rapidly unaffordable.”
Older people should of course expect a decent standard of living in retirement. But should they really expect a standard of living which outpaces that of the average worker, especially when the cost of proving it is likely to mean further cuts elsewhere in the welfare budget down the line?
To reach hundreds of thousands of new readers and to make the biggest impact we can in the next general election, we need to grow our donor base substantially.
That's why in 2024, we are seeking to generate 150 additional regular donors to support Left Foot Forward's work.
We still need another 124 people to donate to hit the target. You can help. Donate today.
6 Responses to “Labour should now look at the ‘triple lock’ state pension guarantee”
robertcp
What should we get more worried about pensions or obesity? How long are the fat people going to live? As Keynes said, in the long run we are all dead.